27 November 2012

Uganda: Locals Cry Foul Over Oil Contracts

Members of Parliament today failed to vote on the oil bill, after opposition Mps and some NRM Mps opposed the voting and instead calling for further ... ( Resource: No Vote on Uganda's Oil Bill )

Dennis Kamurasi is the vice chairperson of the Association of Uganda Oil and Gas Service Providers, an association at the forefront of ensuring the inclusion of Ugandan companies in the petroleum industry. Edward Ssekika spoke to him about local participation in the petroleum industry.

What is the association all about?

The association of Uganda Oil and Gas Service providers was formed early this year and we had a formal launch recently. As the name suggests, it's a group that brings together Ugandan suppliers who are involved in the oil sector.

The association was formed largely to cater for the participation of indigenous Ugandan companies in the petroleum sector because what we noticed was that most of the players were foreign.

We can't say that there was completely no Ugandan participation; it was there but so minimal. For various reasons, like lack of information, failure to be organized, Ugandans and Ugandan companies were missing out on most opportunities.

Why did it take you so long to come together seeing oil was discovered six years ago?

As you know, oil is a new thing; it is a green field. So, we didn't know much about oil. For instance, some of us didn't know what sort of services are associated with extraction and production of oil and, therefore, it has been basically a learning curve.

First, there is the usual apprehension on the side of Ugandan businesses because they didn't know what they were entering into. Secondly, the companies that are drilling have been doing this for a long time; so, they have particular companies which they have been working with in other regions.

Ugandan companies were not exposed to this, but, as we moved on, we began to realize that there are many services that we can be involved in. We can supply food, offer welding services, drive trucks, offer freight forwarding services, and so on. We can also find a way of mobilizing finance.

A country like Nigeria, which has been drilling oil from the 60s, has just enacted the local content law in 2010. So, as Ugandans, we don't need to make this mistake of waiting for 30 years before our eyes are open. Nigerians realized it late but for us we have the benefit of learning from our African brothers.

Oil companies have always complained that local companies lack the required standards. How are you going to raise the standards of your members?

First, we must remember that nobody is born with all the knowledge; all these things are just learnt. Now, since this is a new sector in Uganda, it is going to be very difficult to find a Ugandan company which already has all the required standards.

Ugandan companies have to first be educated on these standards so that they can gradually implement the required standards. That doesn't mean that because of inadequate standards, you eliminate all Ugandan companies.

What should be encouraged is partnerships, memorandums of understanding, joint ventures between Ugandan companies and other outside companies that are versed with standards and experience, such that after a certain period of time, Ugandan companies will have acquired standards and skills, and then take over.

Look at the black empowerment programme in South Africa; I think that is a kind of strategy that can as well work here. There should be clear succession plans which involve Ugandans because this is a Ugandan resource.

Are you saying foreign companies should be excluded?

No, we are not looking at excluding the foreign element; there are certain things which are highly specialized which Ugandans might not be able to do at the moment. These are things like building rigs - that is a domain for certain companies.

How is the association going to empower Ugandan companies?

Under our association, if they tell us they need welders, we will back one company, offer bid security and try to make sure that we render available support for our member to win the tender because as a group we have much more clout.

There is little that you can achieve as an individual. We need a much bigger, stronger entity. We shall train companies on standards instead of bringing expatriates at four times the price.

Our biggest weakness as a country is that we are unable to put aside our trivialities and focus on things that actually help and unite us. As a bloc, we are much stronger and we have a platform where people can express their grievances.

We have a case of Bemuga [Forwarders Ltd], where he had his contract cancelled. That is an eye-opener. If we can use the association and lobby and go to parliament and show how Ugandans are treated, that is fine.

What is your relationship with oil companies so far?

We have a good working relationship with the oil companies. Even at our launch, there was representation of the oil companies. Actually, they have been very cordial, especially Total that expressed willingness to work with Ugandan companies.

Taking about local services providers, how local are these companies?

We are getting that problem a lot. There is a particular company which is owned by two British nationals [citizens] who have recently got Ugandan passports. Now, these two guys have incorporated three companies. All of these three companies have contracts with oil companies.

That is an avenue which is being used by some of these people. You see the definition of what is a Ugandan company needs to be made clear. In Kenya, the definition of a Kenyan company is one, where 51% of the shares are owned by a Kenyan or Kenyan nationals.

In Angola, it's 70% and they use the word indigenous; it means that person has to be indigenous in Angola. That safeguards local companies from this trickery because foreigners can come, incorporate companies, purport to be Ugandans and leave Ugandans out.

In Uganda's case, probably, I would go with the definition of Angola. In parliament when MPs were discussing the bills, Hon Alice Alaso [Serere Woman MP] moved an amendment saying that for a company to participate within the sector, in terms of supply, it should be 48% owned by Ugandans.

It was supported by the entire house. You see, there can be exploitation if these things are not sorted out early. The law should help to iron out that vagueness of what is a Ugandan company.

Currently, what the two oil bills provide for is that goods which can be procured in Uganda should be procured in Uganda and Ugandan-owned companies should be given the benefit if such an opportunity arises. But I think this is still broad and subject to interpretations. So, it is a start but we need tighter policies.

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